We uphold the validity of a court-promulgated directive that allowance of attorneys' fees on the entry of default judgments shall be determined on a quantum meruit basis rather than by mechanical application of a blanket
On November 19, 1975 at the direction of the Administrative Judge of the Nassau County Courts, the Chief Clerk of the District Court of Nassau County issued a directive to the various district court clerks that no default judgment containing an allowance for attorneys' fees was thereafter to be entered until there had been an inquest by the court to assess the proper amount of the fee in the particular case. Thereafter, following a conference between the Administrative Judge and the leading collection attorneys in Nassau County, a revised directive of the same import was issued by the Chief Clerk on January 23, 1976.
In February, 1966 retained attorneys for appellant bank presented the appropriate supporting papers for entry of a default judgment in the amount of $135.32 based on a motor vehicle retail installment contract. In reliance on an express provision of that contract, the proposed default judgment included a claim for attorneys' fees in an amount equal to 15% of the unpaid balance, or $20.29.
As stated at Special Term, "[t]he attorney for the petitioner concedes that the Court can direct an inquest as to the reasonable value of the attorneys' fees where an answer has been interposed, and the attorneys' fees are requested either on a motion for summary judgment or during the course of a trial." It is the bank's narrower contention in this case that such procedure is not authorized with respect to the entry of a
At the outset there should be recognition of the traditional authority of the courts to supervise the charging of fees for legal services under the courts' inherent and statutory power to regulate the practice of law (Gair v Peck, 6 N.Y.2d 97; cf. Judiciary Law, §§ 53, 90, art 15). We perceive no sufficient reason for observing the difference that the bank urges between the determination of attorneys' fees in contested matters and on default. Beyond the court's inherent power to supervise the charging of legal fees, we have recently had occasion, in considering an express agreement between creditor and debtor purporting to fix attorneys' fees, to recognize the strong public policy of our State which condemns the contractual imposition of a penalty (Equitable Lbr. Corp. v IPA Land Dev. Corp., 38 N.Y.2d 516).
The present court rule does not foreclose the collection of a 15% attorney's fee. In essence it requires only that there be an appropriate demonstration that the quantity and quality of legal services actually rendered are such as to warrant, on a quantum meruit basis, that full percentage. If not, the fee will be fixed by the court at a proper figure on the same basis. It is evident that the reasonable value of legal services rendered incident to the recovery of a default judgment will not automatically and always be equal to 15%, or indeed to any other percentage, of the amount of the indebtedness being collected.
To uphold the directive of the court in this instance does not operate to eviscerate subdivision 7 of section 302 of the
For the reasons stated, the order of the Appellate Division should be affirmed, with costs.